VeChain (CCC:VET-USD) is a cryptocurrency that you may not have previously known to exist. After all, there are too many altcoins these days, making it virtually impossible to be aware of all of the options unless you are an enthusiast or loyal supporter. I am not one of these folks. Instead, I prefer to look at stocks based on fundamental analysis. So, only when I started to research the VET token for this piece did I find out about the other coin associated with VeChain: VeThor (CCC:VTHO-USD).
I’ll admit, this is an interesting development. But interesting is not always a solid reason to invest in a stock or crypto, nor (to be more accurate) speculate on the VET token. In order to do our due diligence, then, I have gathered five key facts that you should know about VeChain moving forward.
Here’s what should be on your radar with VeChain and its tokens.
1. What Is VeChain?
When it comes down to figuring out exactly what VeChain is, I’ve come across two main descriptions that you may find helpful. Of course, there’s an analytical whitepaper that has all the details. But after research, I found the following summary from Investopedia to be similarly clarifying.
“VeChain is a blockchain platform designed to enhance supply chain management and business processes. Its goal is to streamline these processes and information flow for complex supply chains through the use of distributed ledger technology (DLT).”
Likewise, CoinMarketCap also mentions that “VeChain aims to use distributed governance and Internet of Things (IoT) technology to create an ecosystem that solves some of the major problems with supply chain management […] The idea is to boost the efficiency, traceability, and transparency […] while reducing costs and placing more control in the hands of individual users.”
Finally, though, the VeChain whitepaper outlines the following about the crypto’s blockchain: “VeChainThor is a public blockchain that is designed for mass adoption of blockchain technology by business users of all sizes. It is intended to serve as the foundation for a sustainable and scalable business blockchain ecosystem.”
So, the main thing to remember here is that this blockchain is oriented towards business — and more specifically, the supply chain. And the tokens? They’re the foundation for that facilitation.
2. VeChain’s Price Stats
So, now that we have a bit of a handle on what VeChain does and is for, maybe it’s best to cover what’s been going on with the VET token’s price.
As of the open of Jun. 29, VET was trading for around 7.9 cents. For this crypto, a wild price move occurred starting back in late December, when it was worth only about 1.7 cents. In a parabolic move that’s become somewhat typical of altcoins, the price moved up to about 25 cents by late April. Since then, though, a selloff has followed and the price has taken a plunge to its current level.
Of course, this elevated volatility confirms the extreme riskiness of investing in the cryptocurrency market. But is this wild rally and huge selloff attributable only to speculation? Right now, there’s not much to reason to believe otherwise. Still, there may be some points to consider Vechain for yet.
According to CoinMarketCap, VeChain is currently ranked 22nd among cryptos with a market capitalization of $5.9 million. The current circulating supply of VET is just over 64 billion, however, meaning that the current number of VET-USD tokens only amounts to about 74% of the total potential supply.
3. The Derivative Second Token
What is better than just buying a crypto token? If you answered “huge profits” I get it — that’s the ultimate goal. But for now, we should be more realistic. Instead, one possible advantage with VET-USD is that you get not just one token, but two.
I was skeptical about this at first, but the VeChain whitepaper lays out how VTHO is generated as clearly as possible:
“[T]he VeChainThor blockchain economic model […] governs the VeThor Token (VTHO) generation from VeChain Tokens (VET), an estimation of market demand and supply of VTHO […] In summary, VTHO is generated via holding VET with velocity, which is established to allow any user with VET to make transactions at no extra cost if the user holds the tokens for long enough.”
I know, I know — this is a bit confusing. But there’s a tad more. The whitepaper continues:
“Based on the VTHO generation model, we can estimate the supply and demand of VTHO for each given day […] The demand of VTHO comes from smart contract execution and payment transactions. To stabilize the transaction cost in fiat and maintain the equilibrium of the demand and supply of VTHO, the Foundation closely monitors the market and estimates the demand VTHO based on the activities of applications running on the VeChainThor blockchain and token transmissions.”
Of course, the whitepaper goes on further. But, basically what we have here is a derivative product — the VeThor token — which is generated from VET tokens. So, perhaps this relationship adds some attractive depth to the overall ecosystem.
However, this system also raises a question: doesn’t this mean that VET is really a security rather than a currency? Because of this complexity, I foresee the U.S. Securities and Exchange Commission (SEC) having some work to do here. In my view, a security classification would mean future regulation. Yet, time will tell if this becomes the case for VeChain.
4. Not Proof of Stake, Nor Proof of Work
So far, we’ve covered some of the features of VeChain that could be double-edged swords. However, there is one differentiating factor here that may be of interest — and purely beneficial.
What am I talking about? Well, the VeChain ecosystem does not use a proof-of-stake nor proof-of-work system like other cryptos do. Instead, it goes beyond these by using a “proof-of-authority” system. Binance Academy describes this kind of system well:
“Proof of Authority (PoA) is a reputation-based consensus algorithm that introduces a practical and efficient solution for blockchain networks (especially the private ones) […] The PoA consensus algorithm leverages the value of identities, which means that block validators are not staking coins but their own reputation instead. Therefore, PoA blockchains are secured by the validating nodes that are arbitrarily selected as trustworthy entities.”
Some core advantages of this PoA system are high scalability, privacy protection and “an effective and reasonable solution” for business applications like supply chains.
5. The Vision and the Partnerships
Maybe the last thing you should really understand about this crypto and blockchain, however, is the vision.
VeChain is about lowering barriers of entry and enabling businesses to use blockchain to solve real-world economic problems. It’s about open finance rather than decentralized finance (DeFi). VeChain offers a diverse ecosystem with several builders, from enterprises and communities to startups, institutions, regulators and more.
The use cases here are promising and innovative. From a transparent supply chain in the food sector, to solutions for anti-counterfeiting and more, VeChain is about building efficiency and trust. Now, there is already a growing list of VeChain’s partnerships in the business world, including big names like BMW (OTCMKTS:BMWYY) and Renault (OTCMKTS:RNLSY).
Basically, there is some real traction here.
The Verdict on VeChain
When it comes down to it, I personally consider all cryptocurrencies as highly speculative bets with questionable intrinsic value. However, supply and demand is what will ultimately define the value — or rather, the price — of VET-USD.
Is the price now too low? Hard to tell. Can it move higher? Maybe. Trying to predict what will happen next is a coin toss. Who knows what the price will be in a few months or years.
That said, there are some truly compelling features here. I like the business concept, the vision and the utility. And, I reckon that VeChain’s big-name partners have also seen something of value in it. VeChain is definitely something to keep on your radar.
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On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.